“The first time children make decisions together about significant wealth, it is usually around settling the parents’ estate,” said Mr. Rogerson, the director of family wealth services at BNY Mellon Wealth Management. “That is a bad time for siblings to learn about making decisions as a group.”
Mr. Rogerson, 51 and the father of two girls and two boys, has them off to an early start. Six years ago, when they ranged in age from five to 15, he and his wife decided to entrust them with $5,000 each year. The children were to invest the money, which would be used for the family’s summer vacation. If the fund prospered, they might go to Disney World, he said. “If it stayed flat, we would go around the country and visit family members,” he added. “If the investment fell, there was always a camping trip.”
The family’s investing adventure has included camping trips as well as other spartan vacations and it has given the children some basic education in finance and in teamwork, Mr. Rogerson said.
The point of the experience, learning to work together to make intelligent decisions about money, is an important one, and not just for wealthy families, according to many experts.
Ted Beck, president of the National Endowment for Financial Education, for example said he and his wife have had their children run several garage sales, mainly to teach them to work together in handling money. People with family businesses may want to have their children work for them part time to gain real-world experience. Merely talking about teamwork and money isn’t enough, Mr. Beck said. “Tying the educational moments to an actual event is when it really sinks in,” he said. “Otherwise, it is way too theoretical.”
It is important to explain how stocks and bonds work as well as to teach the art of working together in an emotionally laden family setting. “We encourage financial literacy for youth
to help lay a foundation for them to learn to manage money and ensure financial stability,” said Jeanette A. Tucker, professor of family economics at the Louisiana State University Agricultural Center. “The teamwork concept helps to strengthen strong families and prevents lots of hurt feelings.”
Such lessons are useful for a family regardless of its financial status, said Joline Godfrey, author of Raising Financially Fit Kids. “It does not matter if the families are eking it out or if they are prosperous,” she said. “Any teaching that goes on for several years gives a clear message that it takes time to build a financial base.” She added: “It is also important to be explicit about your values. Otherwise, the kids will adopt the culture of their peers and that is all about consumption.”
She described Mr. Rogerson’s approach as “a financial Outward Bound.” Faced with a challenge, she said, “they have to try it” and will pick up valuable lessons along the way.
Mr. Rogerson turned his kids into investing guinea pigs in 2001 — a bad year for the domestic stock market, as it turned out.
“The kids knew nothing,” he recalled. “They bought stocks like Apple and Hasbro and
all these penny stocks at high-tech and toy companies. Their pile went down from $5,000 to $2,000.” That year, the family went camping.
During the second year, the children were so nervous about “putting Mom and Dad back in a tent again that they eventually put all the money in money market accounts. They made $50,” he said. “That year we drove down to Florida to visit family. Since we were six people, we stayed at Holiday Inns along the way. We spent the money on motels, food and entertainment. My father lived in Daytona and my wife’s mother lives in Naples. Along the way, the kids made decisions about what kinds of restaurants we could go to.”
By the third year the investing bug had bitten and the children wondered: “How do we invest so maybe we can do something more fantastic?” They bought stocks that were more conservative: a diversified portfolio that included large-capitalization stocks. They also had fixed-income investments. The young investors earned $600 on their $5,000 that year, and the family rented a catamaran and went boating near Mystic, Conn. (choosing it over Disney World). “I would love to tell you they loved it, but it rained all week,” recalled Mr. Rogerson, who is based in Boston.
Mr. Beck said he and his wife, a former banker, were determined to talk to their children about finances at their individual paces, but the couple also wanted them to work together. They settled on garage sales.
“It was interesting to see how they divided up their roles,” Mr. Beck recalled. At an early sale, one daughter, Katherine, then in junior high school, handled pricing because she had already gone to garage sales with friends; she took a leading role in the project.
“What really struck us was that the kids knew each other’s strengths better than we did,” he said. “They split the $100 that they earned, but they agreed not to split it equally because Katherine had done the most.
”Mr. Beck was quick to add that projects like this one wouldn’t necessarily interest
all children equally. While his children all participated and cooperated well, he said, only Katherine showed real interest in business. She is now majoring in marketing in college.
Of course, convincing children to work together when they are young is no guarantee they will do so as adults. The hurdles are far higher, Mr. Rogerson said. Spouses may complicate matters, and insidious rivalries can grow out of envy and mistrust. But he is convinced that early sibling partnerships, as he calls them, can help counteract those tendencies.
Like Mr. Beck, Mr. Rogerson said that the effort has helped them discover their own aptitudes. “We found that one boy showed great leadership and the other one was great with spreadsheets and tracking information,” he said. “Each had a different focus.”
